Misbehaving firms can harm other companies in their sector

Announcement of a firm’s bad behaviour can have a negative affect on firms within the same industry due to lowered investor confidence.

Research from Pennsylvania State University showed firms that have not been accused of misconduct will often be placed into the same category of a firm accused of wrongdoing. Studies also suggested investors will see perpetrator firms as representative of the entire industry, and will make generalisations based on their actions.

Read more at Pennsylvania State University